Importation Will Not Lower Drug Costs

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

July 31, 2018 - 14:40 — Elizabeth Wright

Citizens Against Government Waste (CAGW) was disappointed to see that the Trump Administration announced on Thursday, July 19, that the Food and Drug Administration (FDA) is exploring ways to import lower cost drugs from foreign countries. Since most countries utilize price controls to determine a drug’s cost, the U.S. would simply be importing a bad policy that will not lower prices. Furthermore, as the FDA has stated for years, this risky idea is likely to provide access to drugs that would be counterfeit and ineffective, or worse, dangerous and deadly.

The FDA claims this policy would only be applied in very narrow instances, like when there is no patent or market exclusivities in place and when only a single manufacturer is producing a drug. Other conditions could include “dislocations in the supply chain or sudden, significant price increases that close off channels of availability.”

The most notorious example of a significant price increase was when Turing Pharmaceuticals, headed up by “Pharma Bro” Martin Shkreli, increased the price of Daraprim, used to combat toxoplasmosis, from $13.50 per tablet to $750, more than a 5,400 percent increase.

Daraprim’s patent expired long ago and the drug has a small market of only 2,000 patients annually. Clearly, no pharmaceutical manufacturer wanted to risk the capital and time to develop a generic version, considering the average FDA approval time was beyond 30 months and there was a backlog of 2,700 generic drug applications prior to implementation of the Generic Drug User Fee Act (GDUFA) in 2012.

CAGW is also concerned the FDA will get involved in importing drugs when there is a “significant” price increase that may cause patient access problems. We do not think the FDA, or any government agency, should determine what “significant” means, since it cannot be an objective standard and could change from one administration to another. There are many conditions that could cause a drug’s price to increase, such as a shortage of a compound needed to manufacture the drug. The marketplace is much quicker at solving these issues without the government getting involved in determining an appropriate price. History is filled with examples of governments interfering with the market when it has been determined a price is too high and making it worse. For example, when the Nixon administration meddled with petroleum prices in the 1970s, the result was shortages and long lines at gas stations.

In June 2017, FDA Commissioner Scott Gottlieb announced a new policy to expedite the review of generic drug applications for drugs where there is limited competition and provided a list of more than 200 off-patented and off-exclusivity branded drugs with no generic counterpart. The policy would include expediting all generic drug applications where competition is limited until there are three approved generics for one off-patented brand drug. Perhaps the FDA may want to consider other incentives, such as cutting the drug application fee significantly, currently at $171,823, or no fee, for the first manufacturer to step forward to make a generic to an off-patented, off-exclusivity brand drug. The agency could also provide discounts on other fees a generic firm is required to pay, such as drug master files fees, program, domestic, and foreign facility fees.

The median FDA approval time for a generic drug was reported to be 26.7 months in the second quarter of 2018 and manufacturers also face a backlog of more than 4,000 generic drug applications.

CAGW believes the FDA’s resources and energy would be better spent focusing on making the expedited review policy work efficiently and reducing the backlog of generic drug applications across the board instead of creating a costly new system to handle imported drugs that could cause an influx of dangerous counterfeits and do nothing to lower costs.